Hello Generalist was born from a recent pendulum swing in startup land.
The players on the field are the same as the last ten years: entrepreneurs are starting more companies than ever, investors continue to allocate capital, risk-tolerant early hires still show up to build. But the game they’re playing has swung in a new direction.
This latest ten year cycle of growth-at-all-costs advice from VCs has finally shifted, with 2021’s ZIRP fueled, mega valuation rounds seemingly serving as it’s roaring finale. As the market cooled in 2022 and ‘2023, startups were unable to live up to those valuations, course correcting with layoffs, reforecasts, and a new focus on profitability (Box CEO Aaron Levie does an excellent job recapping this in the recent episode of BG2, minutes 4:00 - 13ish).
What fascinates me is that amid these big market changes, my smartest friends are making radical new choices — quitting high paying jobs to pursue solo-preneurship and fractional work, building profitable businesses instead of pursuing VC, adjusting their lifestyle to prioritize freedom from the system they used to rely on. It’s a rage against the machine. It’s startup nerd-dom trending again. It’s punk rock. I love it.
I couldn’t think of a better person to reflect on this with me than Shruti Shah. For many, she doesn’t need an intro: Co-founder and COO of MoveLoot (YC W14), EIR inside both Nike and Silicon Valley Bank, Investor at Symphonic Capital, and many other titles at many other companies you’ve heard of. Today, she works as both an investor and as a Fractional COO, a key thread in the fabric of Silicon Valley startup land.
As MoveLoot’s Founder, she saw the downsides of this growth-at-all costs approach, ultimately shutting down her company. Her perspective pushed her to research alternative financing options during her Entrepreneur in Residence role at Silicon Valley Bank, and now informs her work as both an early stage investor and as a Fractional COO.
On a personal note, Shruti’s been a great friend as I’ve built HG, once even taking a call with me to brainstorm alternative financing options while on a roadtrip with her family. I think you’ll feel her warmth through the screen here, too. Happy listening!
Drop 1. Trying to fundraise right now? You don’t have to raise venture capital.
It’s not just what’s right for my business, it’s what’s right for me as an entrepreneur. There are actually a lot of financing options out there.
VC is the most expensive capital you’ll ever take: you’re giving up a large percent of your company for what could be future value. I think people are like, “well, I’m not giving up any money right now,” but there’s other routes.
Take it back to your team:
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Have you made assumptions that VC is the only route to fund your company? What about revenue based financing? What about traditional debt? What would the impact on raising VC be on your life, not just your company’s bank account?
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How are you leveraged to own the conversation with investors? With the resources you have, can you become profitable? Improve unit economics? Great advice for any year, but particularly 2024.
Drop 2. Lessons from MoveLoot (YC W14): More money, more problems.
We felt tremendous pressure to grow quickly. About 3.5 years in, we changed the business model, and it wasn’t necessarily the right decision for our business, it was in an effort to deliver on the expectations that had been set because, we were, for a while, a hot ticket! It was a fun and cool place to be, but not a sustainable one.
Take it back to your team:
- What’s the right and sustainable way for you, as the entrepreneur, to grow your business? The answer doesn’t have to involve venture capital. If you can keep yourself alive long enough to hit the market at the right time, that’s often where you see the success stories.
Drop 3. When should a startup hire a COO?
When you start to grow, it can be really helpful to have someone else as a strategic thought partner. As the business grows externally, how you think about the internal growth. Whether that’s performance reviews, OKRs, or thinking through how you communicate across teams.
I also spend a lot of time with CEOs thinking about fundraising.
Take it back to your team:
- A COO is a powerful helper in setting your internal goals, and how that contributes to financial, customer, and operating plans. Thinking about fundraising? Ready to grow? A COO might be the right hire for you.
Drop 4. How should startups think about working with a Fractional COO?
Usually it’s someone who’s working with the team a few days a week, depending on the stage of the company, to help set up systems, structures, and processes. Both to help with hiring people, but also with the strategy work — goal setting, strategic planning, being thoughtful about the resources and opportunities to continue that growth path.
I’ve seen how something has played out in 5, 10, 15 orgs, and have a clear sense of what a good path is. The reality is, many startups experience the same problems at different stages. Once you’ve built an org, in my case from 4 to 300 people, many of these problems are the same, they just show up in different forms. Often, there’s a pattern.
Take it back to your team:
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You don’t have to hire a full-time COO (or other exec roles) to get leverage. Hiring part-time leaders (often called “Fractional Execs”) can often get you the same results, with more experienced people than you could afford full-time.
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The same problems tend to show up at every startup. An experienced Advisor can help you avoid these traps.